The Europeans turn off the taps in Syria

Watching the chaos in Syria, it is only natural that the international community might be feeling somewhat impotent right now. Despite growing international condemnation and ever more aggressive rhetoric, including from once strong ally Turkey, the killing in Syria continues as it has done for the past half year.

Even sanctions, one of the few weapons in the arsenal of diplomacy, may not prove as effective, or straightforward, as hoped. More specifically, the West will have to decide how far to take the sanctions and at what price to the population and to themselves.

As it stands, the most significant sanction has come at the hand of the European Union, which has banned the import of all Syrian crude oil, a policy that the EU wonks predict will hit the regime hard. Since 95 percent of oil exports head to Europe, this new sanction should deny the Syrian government a vital source of income.

But we shouldn’t get ahead of ourselves. The oil export industry is relatively small in Syria and accounts for only 25 percent of the regime’s hard currency earnings. This is not Libya, where switching off the oil taps effectively brought the income to a halt.

Moreover, China’s stance on the issue remains ambiguous. When asked in a recent interview about the possible effects of Western oil sanctions on Syria, Mr Assad nonchalantly dismissed the fears, stating that he would simply look elsewhere for a willing importer. China, and to a lesser extent India, remain at the top of that potential client list but they have yet to sign any trade deals. Not known for its ethical trade decisions, China may still import Syrian oil, but for the time being at least, Assad’s government is down a quarter on its foreign cash earnings.

So far, so easy. West imposes sanctions; evil dictatorship has less money to pay its murderous security services. Unfortunately, the matter isn’t quite that simple. Preventing the export of crude oil to Europe is a good starting point but the other sectors of the Syrian oil industry must also be discussed.

On Friday 23rd September, the EU sanctioned all foreign investment in the oil industry, hoping that it would deprive the regime of another source of income. An EU official said that “Syrian oil production is declining and desperately needs investment so the ban will hurt”.

However, while the large multinationals – Total, the China National Petroleum Company (CNPC) and Shell – are indeed investing millions into Syrian oil exploration and for future developments, these capital investments are not going to be financing Assad’s regime any time soon.

A recent article in the Guardian argued that the “likely outcome of Shell’s investment is that Assad has more money to spend on soldiers, weapons and prison cells.” I wish this were the case. If Shell were in fact putting money into the hands of the Syrian regime, the West would have a very straightforward avenue to pursue in cutting Assad’s finances.

In reality, the investments are long-term and will eventually contribute to arresting the decline in oil production. It could be argued that while a brutal despot remains in power no one should be improving any part of Syrian heavy industry, let alone one that provides almost a quarter of his income. But equally, the investment will ultimately benefit any new, democratically elected government once Assad is kicked out of power, an increasingly likely prospect.

The West’s biggest challenge in restricting the capacity of the Assad regime will come when it has to deal with today’s light crude production stream, another sector that some foreign companies are involved in. Unlike the heavy crude, much of which is exported, light crude is sent to Syrian refineries and converted into the various oil products necessary to keep a country moving.

Since cutting the light crude supply would literally stop the regime’s tanks from rolling, Shell has come under significant pressure from the media to withdraw their in-country expatriate staff. But the expatriates are mainly work on the new investment projects, now under sanctions. It is the operating company Al Furat Petroleum Company, with mainly Syrian staff, that operates the fields already on production. And there are likely to be enough pro-Assad employees to continue functioning. Withdrawing expatriate workers would be a symbolic act at best.

Since this same light crude is refined to power the cars and homes of Syria’s civilians and with fuel prices already high, any disruption in the flow of oil could bring the country to a standstill, increasing the suffering of the Syrian people. The arrival of winter is also worrying many Syrians. There is growing evidence that mazoot, the diesel used to fuel heaters in homes, is being stockpiled out of fear of a sudden shortage. Is there enough mazoot for everyone, even with the stockpiling? Without this basic commodity, Syrians will be in for a long and bitter winter.

There is no doubt that Syria is starting to feel the bite of economic isolation. But is it enough to bring down the Assad regime? A crucial step would be for Assad’s circle of nouveau-riche businessmen to reassess their position and jump ship while they still can. However even the recent precarious budget proposal from Damascus, with a 58 per cent increase on government spending, is unlikely to send the elite scurrying away just yet. By all predictions, Syria’s economic future is bleak. But as an independent Syrian economist stated in The National, “This will not topple the regime. The business community isn’t happy about any of it but they will not turn against the regime, they cannot, they will not”.